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Why Are So Many Companies Incorporated in Delaware?

This Fool knows you know you have always wanted to know.

You can find the words "A Delaware Company" on the first page of SEC filings from many companies. Perhaps you skip over the boring format pages in the beginning. Maybe you just accept it because it's always been that way. But after noticing that a company I follow closely was listed as a Delaware company -- despite being headquartered 3,000 miles away in San Francisco -- I had to ask, "Why are so many companies incorporated in Delaware?"

One reason is obvious. Companies from all sectors of the economy -- Halliburton(NYSE:HAL), Wal-Mart, Google(NASDAQ:GOOGL), and Coca-Cola(NYSE:KO) -- have flocked to the state for the coveted Delaware Loophole, which allows companies to shift royalties and revenues to holding companies in the state to avoid paying taxes in other states. It may sound like a good time, but there is a growing chorus of international governments speaking out about the shadowy tax-haven of Delaware. It is certainly a big problem -- almost 1 million corporations call Delaware "home" -- but it actually isn't the only reason to incorporate in the state.

Author

Maxx has been a contributor to Fool.com since 2013. He graduated from SUNY-ESF (2012) with a Bachelor of Science in Bioprocess Engineering and from Carnegie Mellon University (2016) with a Master of Science in Materials Science & Engineering.